Exchange traded notes differ from ETFs in that the notes are not backed by underlying shares, and are a promise from the issuing bank. Bank notes are riskier than ETFs because if a bank were to go bankrupt, investors would be in the same position as other unsecured creditors. [TVIX Fallout Lingers for Volatility Products, ETNs]
The two largest fund providers are crusading to gather more clarification on notes versus funds because the two are sometimes merged together by investors and the public.
Meanwhile, the Securities and Exchange Commission is looking into price movements in the Credit Suisse note, known as TVIX, which has since been reopened to new investors. FINRA, the self-regulatory organization for brokers, is also researching associated data. An investor warning may soon be issued with ETNs since the TVIX meltdown.
Tisha Guerrero contributed to this article.